Dow Jones futures were little changed Monday morning, along with S&P 500 futures and Nasdaq futures. The stock market is open on Monday, but bond trading is closed for Columbus Day.
A stock market rally attempt got underway last week, with big early gains for the Dow Jones and other major indexes. But as hopes for a Fed pivot faded again, Treasury yields rebounded and stocks tumbled. Along with warnings from Advanced Micro Devices and CVS Health, the major indexes wiped out most of their gains by Friday's close.
While the market rally attempt isn't over, the Dow Jones, S&P 500 and Nasdaq are back near bear market lows. Investors should be extremely cautious.
Vertex stock, Neurocrine Biosciences and Eli Lilly are trading right around buy points. NBIX stock and Vertex Pharmaceuticals are on IBD Leaderboard.
Tesla, Enphase Energy and On Semiconductor, three stocks that had been close to buy points, suffered big sell-offs. TSLA stock sold off Monday on disappointing deliveries, then kept sliding. Enphase stock briefly flashed an aggressive buy signal Tuesday, then abruptly plunged Wednesday. ON stock closed above a trendline entry Thursday, but dived Friday amid AMD's chip sell-off.
Megacaps aren't helping. Microsoft stock, Google parent Alphabet and Amazon.com, all just below their 21-day lines Thursday, fell sharply on Friday, back toward bear market or short-term lows. Apple, which never reached its falling 21-day, skidded toward short-term lows.
Microsoft and Google stock are on IBD Long-Term Leaders. ON stock is on the IBD 50. Onsemi, Vertex Pharmaceuticals and ENPH stock are on the IBD Big Cap 20. Vertex was Friday's IBD Stock Of The Day.
Dow Jones Futures Today
Dow Jones futures were flat vs. fair value. S&P 500 futures lost 0.1% and Nasdaq 100 futures declined 0.25%.
U.S. bond markets are closed Monday for Columbus Day, so stocks won't take their cue from Treasury yields.
Crude oil futures tilted lower, while copper futures rose more than 1%.
Hong Kong's Hang Seng index tumbled nearly 3%, reacting to Wall Street but also to expanded U.S. controls on chip exports to China. That hit Hong Kong-listed chip, internet and EV names.
Remember that overnight action in Dow futures and elsewhere doesn't necessarily translate into actual trading in the next regular stock market session.
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Stock Market Rally
A stock market rally attempt got off to a strong start, but the indexes closed Friday near bear lows.
The Dow Jones Industrial Average rose 2% in last week's stock market trading. The S&P 500 index climbed 1.5%. The Nasdaq edged up 0.7% after tumbling 3.8% on Friday. The small-cap Russell 2000 advanced 2.2%.
Apple stock rose 1.4% for the week, but sank 3.7% on Friday. Microsoft eked out a 0.6% weekly rise, but skidded 5.1% Friday on AMD's PC demand warning. Google and Amazon stock climbed 3.2% and 1.4%, respectively, slashing solid weekly gains on Friday as well.
The 10-year Treasury yield rallied for a 10th straight week, up 8 basis points to 3.88%. That's after tumbling to 3.56% intraday Tuesday, testing its 21-day line. The 10-year Treasury yield is nearing 12-year highs around 4% set in late September.
The U.S. dollar rallied from sharp losses for a modest weekly gain.
U.S. crude oil futures surged 16.5% to $92.64 a barrel, rising all five days. The OPEC+ production quota cut of 2 million barrels per day fueled gains.
Time The Market With IBD's ETF Market Strategy
ETFs
Among the best ETFs, the Innovator IBD 50 ETF rose 1.7% last week, while the Innovator IBD Breakout Opportunities ETF gained 1.2%. The iShares Expanded Tech-Software Sector ETF climbed 2.6%, with MSFT stock a massive holding. The VanEck Vectors Semiconductor ETF rose 1.9%, but fell hard Friday on the AMD warning. AMD stock is a big SMH holding with On Semiconductor a notable component.
Reflecting more-speculative story stocks, ARK Innovation ETF dipped 0.6% last week and ARK Genomics ETF fell 0.15% — after both dived over 6% on Friday. Tesla stock remains a major holding across Ark Invest's ETFs.
SPDR S&P Metals & Mining ETF leapt 7.3% last week. U.S. Global Jets ETF ascended 3.7%. The Energy Select SPDR ETF surged 13.6%. The Health Care Select Sector SPDR Fund climbed 1.25% with LLY stock a big holding.
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Tesla Stock
Shares plunged 16% last week to 223.07 after record Tesla deliveries fell short of Q3 views amid China demand concerns. Elon Musk signaled he will go ahead with the Twitter takeover, reviving fears that he'll sell more TSLA stock to finance the deal. Musk touting the start of Tesla Semi production failed to provide a lift Friday. Shares are approaching the late May low of 206.84.
Tesla China delivered a record 83,135 vehicles in September, according to industry data. On Tuesday, investors will learn how many were sold in China vs. exported.
Market Rally Analysis
Last week's stock market action was almost textbook. The major indexes, at bear market lows, rebounded strongly from deeply oversold conditions on Monday-Tuesday. But the stock market rally attempt quickly hit resistance at the 21-day line — while Treasury yields and the dollar bounced back. The selling intensified Friday with the strong jobs report.
The market rally attempt is in force until the major indexes undercut their recent lows. But the Dow, S&P 500 and Nasdaq are not far from doing so.
A follow-through day could still come at any time to confirm the market uptrend. But investors should remain cautious, especially if the indexes stage a FTD below their 21-day lines. Also, a follow-through before Thursday's consumer price index carries extra risks.
New Bear Market Leg?
Meanwhile, the risks are high that the bear market will break lower.
The market bounce came amid renewed hopes of slower Fed rate hikes. Falling job openings and Australia's small rate increase bolstered that case. But Fed officials insist they are not backing off, while the jobs report was too hot. Ultimately, the already-high odds of a fourth straight 75-basis-point rate hike in November strengthened last week. Markets are close to locking in at least 50 basis points in December — with a small but rising chance of 75 basis points.
Earnings season could be a minefield. AMD and CVS followed several other high-profile warnings, with earnings season about to kick off. Markets still haven't fully priced in bad news: AMD stock and CVS tumbled more than 10% on Friday.
Key Sectors
Energy stocks surged as crude oil prices soar. Many seem extended, however.
Spiking oil prices may be bad news for the broader market. Higher gas prices complicate the Fed's task of reining in inflation. Gas prices had already jumped, especially in California, on various refinery issues.
Some biotech and drug names are still acting well, somewhat insulated from economic concerns. But can they make much headway if the broader market heads to new lows?
Meanwhile, some tech and medical products names that had flashed buy signals at various points last week later sold off. Some held up reasonably well, while others staged big sell-offs, including ENPH stock and On Semiconductor. Tesla stock, which even a week ago was plausibly close to an entry point, dived toward 2022 lows.
Apple stock, Microsoft and other tech titans aren't leading the downside, but aren't bolstering the major indexes.
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What To Do Now
The arguments for being all or entirely in cash remained strong even at last week's highs, and are even stronger now with the market rally attempt reeling.
If you bought some stocks recently — aside from the energy sector and select medicals — you may have had to cut them already. Even if you're taking only pilot positions, don't let losses mount. If you have gains, you might want to lock some of that in.
Keep working on your watchlists and stay engaged. The market rally attempt could still spring back to life, which would likely trigger buy signals for many stocks. So focus on stocks that are setting up. But also keep a wider list of stocks showing relative strength, even if their charts need repair work.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
